The Gray Tie

Life's Lessons From An Old Guy

Spend Less Than You Make

Spend less than you make. You have probably heard that one before. The idea of living on less than you make sounds pretty simple. Unfortunately, it seems like a lost art.

Look at the federal government. It has been spending $1.43 for every $1.00 it brings in. A child in grade school could tell you that doesn’t make sense. And yet, the federal government is projecting trillion dollar deficits for as far as the eye can see. That’s a trillion dollars, as in $1,000,000,000,000. That is an awful lot of zeros. Each year the deficit gets tacked onto the national debt. That is currently sixteen trillion dollars and counting. That is about $48,000 for every man, woman and child in the United States.

So how did the federal government get in this mess. By politicians making promises that sound too good to be true, because they are. Take the Affordable Care Act for example. The plan is to expand coverage for tens of millions of people. That sounds like a wonderful goal. What will it cost? They say the government will actually end up spending less money. Well, I certainly hopes it turns out that way, but at this point you can put me down as more than a little skeptical.

So, the federal government is the problem? Well, they certainly aren’t the solution, but they aren’t the whole problem. Look at the states, they aren’t in a lot better shape. When times are good, politicians come up with new programs to help their constituents. The problem is that when the economy turns down, revenue drops and these programs that people have grown to depend on are no longer affordable.

Another big problem is that states over promise pension benefits to government workers. When the states are negotiating salary and benefits, they promise generous retirement benefits (paid in the future) to avoid salary increases (paid in the present). That works out great for a while, but when it comes time to fund those generous pensions, it can represent a back breaking burden on state budgets.

So, the government is the problem? Well, I wouldn’t go that far. Voters keep buying the promises of the politicians. And keep re-electing them. They are certainly not without fault.

Then look at the American consumer. Home loans, second mortgages, equity lines of credit, auto loans, personal lines of credit, credit cards and student loans (Oh, don’t get me started on student loans). Americans have signed up for a mountain of debt in their personal lives. That is not to say that all debt is irresponsible, but things have really gotten out of hand. Consumers taking out home loans that everyone should have known that they had no hope of paying for and no one thought it would be a problem (least of all for them). Consumer thinking they can afford to buy some on their credit card because that could still (barely) afford to make the minimum payment.

The American government and the American consumer have not been living within their means. They have (sometime) been (barely) getting by. None of this is a recipe for success for the nation or its people. A better plan is to make sure you spend less than you make.